What money means to you psychologically

This is a discussion on What money means to you psychologically within the Psychology, Risk & Money Management forums, part of the Methods category; Very interesting topic,
I've done some work with a guy called Peter Koenig. He's a fascinating and humble man who's ...

I've done some work with a guy called Peter Koenig. He's a fascinating and humble man who's lived his life as one big experiment with money. His central idea is that money is meaningless/ blank/ neutral. "Money" itself means nothing until you project something onto it. This might be power, fun, glory, happiness etc. For example if someone were to come down to outer space and us to hand them a fiver, that piece of paper would be initially meaningless. It is in fact us, society that are projecting meaning onto that piece of paper.

What struck me was the similarities with what Mark Douglas has written in the book "Trading in the Zone". Douglas writes that the markets are neutral, therefore we bring our own perceptions to create what we think the market is.

Our problems with money/ markets can be a product of our unconsious projections onto money. Therefore one way of helping our problems in these area may be to become conscious of these projections.

Trdr
Outside of the trading environment money means primarily freedom in my view. It provides you with the freedom to pursue those things that satisfy you, whether they are material goods, travel, lack of worry etc. Of course it can also bring misery when it is misused and pursued for its own sake, without taking into account the consequences on, for example, personal relationships. As strewthmate said it is endowed with the projections we place upon it.

Within the trading environment it should on a very different character. If we continue to project our personal meanings onto it i.e. become emotional about it, then it will get in the way of trading.

Within trading we should treat it like any other business. It is an asset that is increased by the amount of profit we make, which comprises the net of our revenue from the sales of instruments less our expenditure (losses from the sale of instruments and other expenses such as data feeds etc).

Losses resulting from the faithful pursuance of our pre-formed strategy is a standard business expense and should be treated psychologically as such i.e. coldly and with acceptance. That does not mean to say that we should look at ways to reduce it.

Losses resulting from a divergence from our pre-formed strategy, due to allowing emotions to take control, are not a standard business expense, but represent a lack of control even negligence. These should be cut out immediately.

With regard to lot size and stop losses I would agree with North face that a percentage would be better than actual $ amounts. However I do not really think that either are the best method of controlling this potential business expense. This is because both are generalisations resulting from the initial concept of "this is how much money I am prepared to lose".

They are not related to the particular instrument, market, market conditions and volatility. The stop should be made as tight as possible. This focus on the specifics of the trade to set it at a level that reflects your skill, experience and accuracy with regard to the entry and exit strategy for this trade. When this is done the stop will not be based on a fixed amount or fixed %. It will simply be set at the most appropriate place.

"What money means to you psychologically? this question could only come from someone with little or no money."

My reply: thank you very much for responding and providing the correct answer – “little or no money”.

This thread is researching ‘pulling the trigger/fear of trading/failure’, subjects repeatedly posted here and on other forums.

Quotes are from an article authored by Paul Counsel and is all I found on the web written by him.

Personally the ‘what money means to you psychologically’ threw me for a loop when I first read it — as did Cheese's answer — succinct and I think accurate.

While this simple answer ‘little or no money’ now appears obvious, it seems to me the problem is that relative to their personal wealth, those individuals experiencing trading problems haven’t answered or even considered asking what amount ‘little or no money’ means to them, what amount of loss would reduce their wealth to ‘little or no money’, and were it to occur, how would loss of their money/wealth affect them.

Some/most/all individuals won’t know the answers until experiencing a loss or series of losses sufficiently large enough to hit their personal ‘little or no money’ level. Whether or not losing traders become financially bankrupt, they are “on the mat and shell-shocked” — psychologically bankrupt.

The common problem for many such traders is being unable to continue or to re-start trading.

The next question is: having been hammered in such a way, how do traders recover from such psychological trauma and begin trading again ?

Someone wrote to me:
“I will assume in this case that their fear of trading has reduced them to poverty... ”
I think the quip goes to the emotional/psychological heart of the loss reaction.
It’s not so much ‘fear of trading’ as ‘fear of losing money’, abstractly — ‘fear of poverty’, a rather absolute state to be in, a terrifying thought one may be reduced to that state.

I tried the NLP technique ‘Eliminating Fears and Phobias’ and found it worked very well, did a little research into using NLP to cure the ‘fear of trading’ thinking similarly easy self-help techniques would be available. Based on expert opinion a whole program is required as well most likely the assistance of an NLP trainer. One is tho likely to become a better overall trader since one’s examining and rebuilding so much of one's modus operandi not just curing the ‘fear’.

Thanks for your contributions.

For those interested I’ll post an ‘Eliminating Fears and Phobias’ pdf on a new thread.